THE 

FEDERAL TRAFFIC BOARD 

' "V 

COMMANDER C?G. MAYO 

Chairman 

Federal Traffic Board 


AN ADDRESS 

Delivered at the Thirty-fourth 
Annual Meeting of the 
Railway Accounting Officers 
Association, Cleveland, Ohio, 
June 7-9, 1922 


Published by 

Railway Accounting Officers Association 
1116 Woodward Building 
Washington, D. C. 



cn* 

?8 192 * 






THE FEDERAL TRAFFIC BOARD 

COMMANDER C. G. MAYO 
Chairman, Federal Traffic Board 

Gentlemen, I feel highly complimented in being allowed to 
address you again. Last year I had the very great pleasure and 
privilege of speaking to you at Atlantic City, then as a repre¬ 
sentative of the Navy Department. This time we have a new 
organization in the Government which is something similar to 
what you gentlemen have had among the carriers for the past 
thirty years or for a great many years, at least. Just recently 
the Federal Traffic Board has been organized and will endeavor 
to carry on through the Federal Government exactly what you 
have been doing for the carriers. 

I have endeavored to outline here, in a few words, what we are 
and what we are trying to do. We also might be in a position of 
coming to you as one of the largest shippers in the country. The 
freight tonnage that the Government moves—the payments there¬ 
for—represent about one-tenth of the freight earnings of the car¬ 
riers. 

At the last session of Congress, the Government of the United 
States was placed o.n the budget system of accounting, a system 
that had been advocated for many years. 

The first report of the Director of the Bureau of the Budget was 
submitted to the present Congress and showed the advantages of 
this system of appropriating for the Government. Many econ¬ 
omies have been effected under this system that were impossible 
to effect in the past. 

In placing the Government on a business basis, the President 
established a system of coordination throughout the Government 
service that has effected many economies and has paved the way 
for greater economies in the future. 

In October, 1921, the Federal Traffic Board was created by 
direction of the President to make a complete study of traffic con¬ 
ditions of the Government Departments and to effect plans for 
simplification of accounts and payments, the reclassification or 
proper classification of Government materials, and the shipment of 
items of materials via freight or parcel post instead of by express. 

The Board is composed of a representative from each of the 


3 


4 THE FEDERAL TRAFFIC BOARD 

twenty-seven Government departments and establishments, and 
functions through a coordinator for traffic who is charged with 
executing the plans and recommendations of the Board. 

One of the first steps of the Board was to promulgate a policy 
that it was essential for each Government Department to create a 
Traffic Department under the head of a Traffic Manager, this 
has been done in six of the largest Government Departments to 
date. The last one to adopt this plan was the Veterans’ Bureau, 
and Colonel Forbes told me night before last that he would put 
them into effect. 

The Traffic Manager, of course, is the representative of the de¬ 
partment on the Federal Traffic Board. It was impossible for 
the Board to obtain from departmental representatives sufficient 
data on which to base recommendations as to the uniform hand¬ 
ling of traffic conditions within the Government Departments, so a 
questionnaire, consisting of 268 questions, was forwarded, and the 
answers have since been received from the Government Depart¬ 
ments and tabulated. Committees were formed to act upon the 
data received in answer to these questionnaires. 

There are several standing committees of the Traffic Board. 

The Routing Committee of the Board now routes all Government 
shipments in quantities of two carloads or more. As a matter of 
fact, they route for most Government Departments all carload 
shipments. The Routing Committee is making a study of track¬ 
age conditions at all Government depots, which is being tabulated 
and put in such form that when a request for routing is received 
from any Government activity a Committee can route this material 
with full knowledge of the local conditions prevailing both at 
point of origin and point of destination. Due to this routing by 
the Government, competing roads now receive an equitable share 
of Government shipments. We are endeavoring to distribute the 
tonnage equally among the carriers. 

The duties of this committee grew to such an extent that it was 
found impracticable for this committee to handle shipments via 
water. 

The Water Transportation Committee was formed to route 
Government shipments in quantities of two carloads or more via 
water where rail and water shipments or all water shipment is 
more advantageous to the Government than all rail shipments, 
every consideration being given to the questions of packing, 
handling, wharfage charges, etc. It is the policy of the Board in 


THE FEDERAL TRAFFIC BOARD 


5 


connection with water shipments to forward as much of the Gov¬ 
ernment shipments via Government-owned vessels as is possible. 
There is no attempt on the part of the Government to go into the 
transportation business. They are required to have certain trans¬ 
ports and as they have those, they are used for this purpose when 
possible. 

The Routing Committee is headed by Mr. H. B. Knowles, who 
is also the representative of the War Department on the Federal 
Traffic Board. 

The Water Transportation Committee is headed by Mr. H. B. 
Bolten, who is also the representative of the Shipping Board on 
the Federal Traffic Board. 

One of the subjects which heretofore has been given little con¬ 
sideration in connection with Government shipments was the sub¬ 
ject of classification. The Classification Committee of the Board 
was formed to properly classify all Government materials or 
reclassify those which, in the opinion of the Committee, were 
improperly classified according to the established commercial 
freight classifications. 

The first step of this committee was to issue a bulletin to all 
Government shipping activities, directing their attention to the 
existing consolidated freight classifications and directing that 
every effort should be made to classify Government shipments in 
accordance with the classifications contained in that publication. 
As it was impossible, however, to properly classify all items 
a questionnaire was prepared and forwarded to Government De¬ 
partments, requesting certain data as to the items in existence 
which were not classified or which, in the opinion of the shipping 
officer, were improperly classified. These questionnaires contained 
all data necessary for action by the three Classification Committees 
of the carriers. 

When questionnaires are received, the matter is referred to the 
Railway Classification Committees, and arrangements have now 
been made whereby these committees will at certain times send 
members to Washington to hold informal preliminary hearings 
in regard to the items that have been submitted to them for classi¬ 
fication or reclassification. The Board is not taking an arbitrary 
stand in regard to these items, but is only submitting for consid¬ 
eration such items as, in the opinion of the Board, either require 
classification or reclassification. 

The duties of this Committee, of course, will be continuous and 


6 THE FEDERAL TRAFFIC BOARD 

probably will not be completed for years. The Chairman of this 
Committee is the Acting Classification Agent of the Interstate 
Commerce Commission, and his experience as a classification agent 
enables the Government to present its views on the classification of 
Government items in a practical way. 

The Board found, from its review of the answers to the ques¬ 
tionnaires, that there was a decided lack of uniformity on the part 
of the Government Departments in connection with accounting and 
payment. This broad subject, which is of special interest to you 
gentlemen, has been the continuous study of the best men con¬ 
nected with the Government’s accounting since last January. 

The Committee on Accounting and Payments is headed by Cap¬ 
tain E. M. Foster of the Finance Department of the Army. The 
War Department, of course, ships 58 per cent of all Government 
tonnage, the remaining 42 per cent being divided among all 
other Government departments. The other members of that com¬ 
mittee are Mr. G. W. Smith of the Post Office Department, Lieu¬ 
tenant S. N. Phillips of the Marine Corps, Mr. N. N. Potts of the 
Department of Commerce, Mr. W. J. Fisher of the Panama Canal, 
Mr. H. A. Poveleite of the Railroad Administration, and Mr. C. A. 
Fenner of the Treasury Department. The Committee on Account¬ 
ing and Payments have now completed a plan for simplified ac¬ 
counting and payments for all Government Departments which, 
when approved by the various departments of the Government, 
will greatly tend to increased efficiency. This plan, in its entirety, 
when approved by the Government, will be submitted to you 
gentlemen for your information, and I feel assured that it will 
meet with your very hearty approval and that the Government will 
receive and give greater cooperation in the future in connection 
with the accounting and payment of carriers’ accounts. 

It might be said, however, at this time, that through the cour¬ 
tesy of the President of this association, a committee composed of 
Mr. Kraft, Mr. Meglemry and Mr. Uhlman, representing the Rail¬ 
way Accounting Officers Association, recently met in Washington 
with the Board’s Committee on Accounting and Payments, and 
studied the Government’s proposed plan insofar as it affects the 
rendition of carriers’ accounts. We have met with cooperation of 
this character since the Board was organized, and such cooperation 
has greatly helped the Board in arriving at satisfactory answers 
to the problems that have been presented to it. 

The Committee on Parcel Post and Express has presented to 


THE FEDERAL TRAFFIC BOARD 


7 


it problems that have been studied by Government Departments 
and Committees from Congress for many years in the past. The 
Committee’s recommendations have been submitted and are await* 
ing action by the Government Departments as to their approval. 

The Committee on Passenger Traffic has made a study of pas¬ 
senger traffic conditions in the various Government Departments. 
The military end of passenger traffic is very well taken care of 
under the Joint Military Arrangement, but this Committee has 
proposed changes in connection with other classes of Government 
travel which it is hoped will be effected in the near future. 

I have given the above resume of the duties of the Board in a 
very brief form. There are enormous problems affecting every 
phase of transportation presented almost daily. The big advantage 
to the Government is in having a centralized Traffic Board which 
can study and recommend traffic changes that will be uniform for 
all Government Departments. This has been of decided advantage 
to the carriers because instead of soliciting business from twenty- 
seven different Government Departments—and some of these De¬ 
partments had as many as nine different traffic heads—the carriers 
now come to the Traffic Board and obtain all the desired informa¬ 
tion regarding Government shipments. 

As I stated before, the Federal Traffic Board is a coordinating 
agency of the Government, and it is believed that its advantage as 
a coordinating agency to the Government can best be effected by 
the closest cooperation with the carriers and associations repre¬ 
senting the carriers, such as the Railway Accounting Officers As¬ 
sociation. It is not desired that the Government take an arbitrary 
stand in regard to handling its business, but it must be realized 
that while this spirit of cooperation is the basis on which the 
Federal Traffic Board functions, that the system of Government 
accounting and payments is the subject of numerous laws and 
decisions and that the Traffic Board must abide by these decisions 
even though at times they appear to the carriers to be very arbi¬ 
trary. In the future it is hoped that many of these arbitrary 
decisions will be modified and that a uniform system will be 
effected which will place the Government in the foremost ranks of 
shippers in regard to its methods of accounting and payments. 

So, you will realize, gentlemen, that in the future, matters that 
the carriers want to present to any department of the Government 
will come to the Federal Traffic Board, which will operate as a 
clearing house for the Government Departments. In the same 


8 


THE FEDERAL TRAFFIC BOARD 


manner, after we have considered, in the Traffic Board, problems 
relating to all the Government Departments, we will submit them 
from the Traffic Board to the carriers. 

Please bear in mind that although the Federal Traffic Board 
has been created to effect economies for the Government, these 
economies are mainly to be effected by placing the transportation 
matters of the Government on a businesslike basis and that in 
every case the Board will take into account the interest of the 
railroads of the country and that no action will be taken which 
would act as an injustice to the carriers. 

I appreciate very much your allowing me to present these facts. 
I know that you will be interested in knowing what we are trying 
to do. 

I thank you, gentlemen. (Applause.) 


The Future of Railway Accounting 

Because of recent legislation and the rules and regulations of 
regulatory bodies, the responsibility of the accounting officer to the 
public is of much importance. The Interstate Commerce Com¬ 
mission says that the accounting officer is to some extent a joint 
administrator with it of the Act to Regulate Commerce. This is 
true, especially of claims which are referred to the accounting de¬ 
partment. In passing upon such matters, the accounting depart¬ 
ment must be guided by the provisions of the law as fully as the 
Commission would be if they were presented to it for adjustment. 

This rapid rise in importance and the expansion of the duties 
of the accounting department are due to a number of factors. First, 
the enormous growth of the railroad corporations through construc¬ 
tion, mergers and consolidations and the investment, in their stock 
and bonds, of thousands of security holders. This demands a much 
more accurate and authoritative determination of profit and loss 
and valuation of assets than when the carriers were owned or con¬ 
trolled by a comparatively few individuals. Second, Federal regula¬ 
tion. The Federal legislation of the past few years governing inter¬ 
state commerce has exerted a more powerful influence on the 
number and importance of the functions of the railway accountant 
than any other factor. Third, since the charges for the service 
rendered by the carriers are practically dependent upon legislative 
authority, it is essential to know the exact value of the capital upon 
which dividends must be paid and the true profit which has been 
earned in order to fix these charges on an equitable basis. Fourth, 
to the personnel of the department itself, and Fifth, to the work 
of the Railway Accounting Officers Association. 

These last two factors are somewhat synonymous as the remark¬ 
able results accomplished by the association is largely a reflection 
of the caliber of the men who compose it and who direct its activities. 
This combination of economic necessity, legislative action and per¬ 
sonal ability have been the levers that have raised the railroad ac¬ 
counting officer to his present position of prominence in the railroad 
field. But the heights to which he may aspire have not yet been 
reached. His new importance is such a recent development that 
there are few, if any, railroad presidents who are purely a product 
of the accounting department. The field of railroad management 
and finance is therefore open to him. 

But aside from a purely personal advancement, the future of the 


1 


2 THE FUTURE OF RAILWAY ACCOUNTING 


railway accounting officer depends largely on the work yet to be 
accomplished. This work is vitally related to the efficiency of the 
transportation machine. It includes such items as the compilation 
of reliable and comparative cost statistics. The standing of the 
railroad accountant has reached that stage where he can initiate 
such statistics. He can, with propriety, go to a general manager 
and point out inefficiencies of operation; he can show a division 
superintendent whether or not his theories of train handling are 
right or wrong, and he can point to that section or extra gang fore¬ 
man or to that bridge and building foreman whose reputation for 
efficiency is based on personality rather than on real accomplish¬ 
ments. 

Another and perhaps the most important phase of railway ac¬ 
counting work of the future is the securing of uniformity and the 
simplification of railway accounting procedure. That the accounting 
officers are fully alive to the necessity of this is shown by the large 
number of recommendatory rules and practices adopted by the Rail¬ 
way Accounting Officers Association. Last year mandatory rules 
relating to interline accounting methods and forms were put into 
effect for the first time. This was a great step forward in the 
attainment of that uniformity in the accounting relationship between 
the individual carriers so greatly desired. 

At the convention of the association this year there seemed to 
have been a reaction against the adoption of further mandatory 
rules. This, to the observer, seems a step in the wrong direction. 
Petty details of accounting, lack of confidence, personal differences 
of opinion and the fear to assume authority should not be allowed 
to stand in the way of simplified and uniform accounting, especially 
when the advantages of proposed mandatory rules are freely ad¬ 
mitted. 


The broad-minded railway accounting officer looks into the future. 
He sees there looming darkly on the horizon the shadow of govern¬ 
ment ownership. But preceding that is the reality of governmental 
regulation. Thus far the regulatory powers of the government or 
of the Interstate Commerce Commission have not invaded the field 
of railway accounting procedure. It has not yet prescribed methods 
by which the accounts should be kept nor the methods by which 
settlements should be made between the individual carriers. These 
methods have been left entirely to the roads and, through the ac¬ 
counting officers association, they have been slowly but surely 
evolving uniform practices and forms. 

When the process of evolution stops, progress stops. And when 

fuxru r Xc.c^cvL c^b, OiL 


THE FUTURE OF RAILWAY ACCOUNTING 


3 


progress stops, disintegration sets in. The result as applied to 
railway accounting is not hard to foresee: merely another extension 
of the powers of the federal government to regulate interstate com¬ 
merce, in this instance the application of compulsory interline ac¬ 
counting methods, leading eventually to prescribed practices govern¬ 
ing all railway accounting methods. What this would mean to the 
railway accounting officer and to the Railway Accounting Officers 
Association is not difficult to determine. 

A third factor that the accounting officer of the future must face 
is what is commonly termed “the human factor in railroading.” 
It is unfortunate, in fact, it is almost tragic in its results, that the 
railway associations have seen fit to give so little time to this very 
vital element of efficient railway operation. 

The accounting officer may feel that he is exceeding his authority 
and reaching out into the field of management when he discusses 
the wage scales or working agreements affecting railroad clerical 
workers. Yet what factors are of greater importance to the morale 
of his force and to the consequent efficiency of the department than 
that the workers be graded as to the importance of their duties and 
reasonable working rules and agreements established. 

But this is not the only element affecting the personnel of the 
accounting department. The problem of educating and training 
the clerical workers has almost equal weight. One has but to glance 
through the agenda of the accounting officers association or listen 
to its proceedings to realize that railway accounting represents the 
most intricate and comprehensive phase of railway work. It is so 
CQmplex and extensive in its ramifications that the freight account¬ 
ing officer will profess openly his lack of knowledge of passenger 
and disbursement accounting procedure; the disbursement officer 
his unfamiliarity with either freight or passenger accounting, and 
the passenger accountant his ignorance of the details of freight 
and disbursement work. 

Railway accounting is so specialized even in its branches that it is 
difficult even for the accounting officer to obtain more than a smat¬ 
tering of the principles involved and of the work performed by ac¬ 
counting divisions other than his own without additional study. 
Yet complete knowledge is very necessary to produce the well-versed 
railway accountant; it is also necessary to perform intelligently 
the duties of the general auditor or comptroller. 

Apply this same reasoning to the chief clerks, the head clerks, and 
the senior clerks of the accounting officers, apply it even to the office 
boy who expects to remain in the accounting department. Isn’t it 


LIBRARY OF CONGRESS 



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4 THE FUTURE OF RAILWAY ACCOUNTING 

highly desirable from the standpoint of the present and future effi¬ 
ciency of the accounting department and from the personal advance¬ 
ment of the clerks themselves, that they be trained in the general 
principles of accounting, in the procedure of the different depart¬ 
ments and particularly in the origin, destination and reasons for the 
work performed? 

The fact that a clerk can reach the position of chief clerk in the 
passenger accounting department without knowing the meaning of 
advances on a waybill is not only a reflection on the individual but 
also on the accounting officer, for his failure to point out a way 
and to encourage the acquisition by his subordinates of that technical 
knowledge of related accounting work so necessary for the main-, 
tenance of morale and the intelligent understanding of all accounting 
procedure. 

A number of individual carriers have taken some very definite 
steps towards training their clerical employees. Periodical meetings 
are held, accounting clubs formed, and in one or two instances 
definite accounting courses established. In many cases the clerks 
themselves have taken the initiative while in others the accounting 
officers have originated the work. But these efforts have produced 
only local results. What is needed is action by the accounting 
officers’ association in proposing a course of study, in cooperating 
officially with those schools and colleges or universities that are at¬ 
tempting to disseminate accounting knowlege and in passing on the 
merits, perhaps through a special educational committee, of such 
courses offered to the clerical workers of the carriers. By acting 
in accordance with this program, the association would secure all 
the results that would accrue from a course of railway accounting 
actually prepared, maintained and disseminated by itself. 

William J. Hobbs, vice-president of the Boston & Maine R. R., 
very aptly summed up the work of the railroad accountant in a 
recent address: “The accounting department,” he said, “has made 
rapid strides in the march of progress during the last decade and 
its position has been fixed as one of the leading branches of the 
service. Its standing in the railway world has been reached after 
many years of patient, intelligent and faithful work, and I am 
confident that its present status can be maintained, and its im¬ 
portance even enlarged by the continuation of an earnest devotion 
to duty, coupled with an eager and ever-yearning desire for knowl¬ 
edge and the application of it in ways that will result in bringing 
about economies in the administration of the properties.”— Editorial, 
Railway Review, July i, 1922 . 


